Hey everyone steve here from 11ish. Today we’re going to talk about Docusign. I straight up forgot about them because I was too busy with life, but thanks to a member of the 11ish collective, we’re going to talk about why I think there is potential for decent gains in the next 3 to 6 months.
To watch this in vid format, check it out here:
I gotta be honest, when Docusign started as a business I thought it was a stupid idea. The reason for that is I just thought it’s so easy to fake a signature on a digital document. However, with the advent of a ton of OTHER digital security improvements, like geo fencing, okta, and more, digital signing is pretty much accepted, trusted, and legal in most of the world. So whether we are talking about real serious applications like multi-million dollar commercial contracts to real estate applications, signing with your keyboard is now ok.
At this point, I feel like any tech you see on good sci-fi movies, where it allows people to interact and work with each other from millions of light years away has a chance of being a winner right now.
There are 3 reasons why I think Docusign is a good investment and I’m not even counting the fact that a ton of hedge funds are making bets on docusign right now too.
Pro: the biggest benefit of a business like docusign is that once you’re an established player who’s built trust in the industry, it’s very hard to get rid of it. The workforce is used to the product, the security team already did the vetting. At this point, there has to be a really good reason for somebody to switch out of a solution like Docusign after it’s adopted. AND when you use docusign, whomever didn’t have Docusign ends up using it which creates a really nice social network viral effect for adoption. Thus with high retention and consistent growth, Docusign is a great long term bet.
Pro: The reason why I think Docusign will exceed expectations this quarter is because the fact that we’ve all been locked up by COVID for 2 quarters now. Businesses who were doing paper signing are in my opinion MUCH more incentivized to do remote meetings and digital signings, because it’d be a cost vs liability issue. So if remote meeting tech is doing well, I think it’s a reasonable indicator for digital signing as well.
Pro: The third reason I find Docusign completely compelling is that YoY, QoQ, their numbers are already good. So worst case scenario, I’m expecting DOCU to perform to expectations. Best case, I’m expecting COVID to accelerate their growth now that people are accepting COVID as part of a workforce’s ongoing business strategies.
Remember guys, I”m not providing you ideas that are JUST good because of COVID, I’m providing you ideas that has good business value and are ALSO accelerated because of COVID. This way worst case scenario you hold your stock as a long. Best case scenario you make a bit more in this phat bubble that we’re currently in.
There are 2 concerns I would like you to take into consideration.
The biggest concern I have is their key competitor imo, which is adobe. They have deep pockets and have been performing well in general. Anecdotally, I hear that quite a few companies use adobe PDF along with DOCU-sign so I suspect that they will continue to battle this space in the foreseeable future, trying to own more segments of the workflow around digital signing.
The 2nd concern is the size and speed of the upside. According to Motely Fool, DocuSign controls an estimated 70% of the e-signature market already, with more than 660 thousand paying customers, signing a new 10 thousand last quarter. Motley also points out that the market size is 25 Billion and has the potential to double in size. So at this point, unless they find new markets to capture, which is what I’d like to see them do or announce, it’s a lot more about upsell opportunities than capturing more businesses. For example, Docusign is getting into more legal content management space, which is a great approach for them to sink a deeper hook with the legal community with more products to buy on top of what they’ve already got.
The one thing I want to point out is that I do not think it’s realistic to expect explosive growth on the scale of ZOOM. Zoom is straight up tackling another part of the world and its success was in the news before earnings. AND it’s tackling the consumer space, which has so much obvious TAM and future B2B implications. Docusign’s roadmap is a lot less transparent, and the fact that they’re hiring a Sr PM for adoption insights makes me think they’re still trying to figure that out. Therefore, I am expecting strong growth with a decent boost from COVID.
So with that in mind, I’d gladly accept but would be very surprised if they knock this one out of the park. Therefore, I think it’d make sense to be more prudent to be a bit more conservative with your bankroll and expectations for the short term, just in case the market has built too much hype into the remote productivity sector after the zoom grenade, especially when Docusign is already up 20%. I’m not so keen on expecting lightning to strike the same spot twice back to back.
In the current market where good news is treated as great news and decent news is treated as not good enough, please make sure you exercise good bankroll management and invest with realistic expectations and caution. Also, generally speaking I do NOT advice people to buy a stock the day before earnings because that is usually when you are USUALLY incurring the most amount of risk with the least amount of gain, since the gain has been built up over the past days and weeks. However, I break this rule myself quite frequently, so take that with a grain of salt.
Ok, please let me know what your thoughts are about Docusign. Have you noticed an increase in usage for Docusign or do you prefer a competitor’s product. If you have any questions, concerns, or requests, please spank that subscribe button if you haven’t already and drop me a note.
Thanks for watching and I look forward to working with you again.